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FRAUD IN THE INDUCEMENT CAUSE OF ACTION WAS NOT DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION; MOTION TO DISMISS SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ motion to dismiss the fraud cause of action should not have been granted. Supreme Court held the fraud action was duplicative of the breach of contract action:

“The essential elements of a cause of action for fraud are representation of a material existing fact, falsity, scienter, deception and injury” … . “Mere unfulfilled promissory statements as to what will be done in the future are not actionable as fraud and the injured party’s remedy is to sue for breach of contract” … . Where, however, it is alleged that the defendant made misrepresentations of present facts that were collateral to the contract and served as an inducement to enter into the contract, a cause of action alleging fraudulent inducement is not duplicative of a breach of contract cause of action … .

… [T]he cause of action alleging fraudulent inducement was not duplicative of the breach of contract cause of action. The first cause of action alleges that the defendants knowingly made false representations in … financial statements, which were collateral to the APA [asset purchase agreement], that these false statements were made in order to induce the plaintiff to enter into the APA, that the plaintiff would not have entered into the APA but for these false statements, and that the plaintiff was injured by this fraudulent conduct …. As the first cause of action alleges misrepresentations of present fact that were collateral to the APA and further alleges that these misrepresentations induced the plaintiff to enter into the APA, the court should have denied that branch of the defendants’ motion which was to dismiss the first cause of action. Did-it.com, LLC v Halo Group, Inc., 2019 NY Slip Op 05644, Second Dept 7-17-19

 

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